Market liberalization is not enough to lower food prices

Liberalizing the entry of agricultural products into the country is not enough to lower food prices, an economist said, adding that the government should support small and medium importers to promote competition.

B-SAFE project leader Winrock International and University of the Philippines economist Ramon Clarete said at a virtual forum hosted by the Philippine Competition Commission (CPC) and the Association Philippine Economic Journalists (EJAP) declined due to the Rice Pricing Act (RTL), the decline was smaller than expected.

“In 2019 we have the RTL and we expect retail rice prices to drop to less than 4.4%. This is not the case. Wholesale prices fell 14.5% and farm gate prices also fell 17.43%. expected by the NEDA (National Economic and Development Authority) on the impact of RTL, “he said.

Clarete said RTL would have reduced the wholesale price of rice in the National Capital Region (NCR) from 39.08 pesos per kilogram in 2018 to 26.82 pesos per kilogram in 2019. The wholesale price of rice in the RCN in 2019, however, came in at 33 pesos. 0.79 per kilogram.

“It’s still a significant reduction, but probably not that much. And then retail prices and wholesale prices should move closely. Retail prices are just down 4.4%,” he said.

“It is probably that the market is made up of heterogeneous importers. Those who can import are the large and the few and the small to medium-sized ones face high import costs and decide not to import,” Clarete added. .

Clarete said there are probably two groups, the first of which is made up of existing large traders who hold a larger share of the domestic rice market because they have invested in storage and other market facilities.

“But there are only a few. The other group is the one of us who want to start a business, start importing, these small and medium businesses. But we face an entry cost because that we don’t really know the company, so it takes us a long time. So if in 2019 we are allowed by law to import, it does not necessarily mean that we are starting our business, ”he said. declared.

“So it is possible that only the group one remains and when they stay they tend to have a dominant position in the market and they control the price, they control the volume of imports and the price remains high,” added Clarete.

Clarete added that in the Philippines, food prices tend to be higher than those in mainland Southeast Asian countries.

“This is the problem because as a SWS [Social Weather Stations] had documented, the perception of self-rated poverty is still very high in our country and food is a very important expense for many poor families. I see this from the point of view of the lack of competition or the existence of barriers to entry into the market, ”he added.

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